As Norway sells out of oil, suddenly fossil fuels are starting to look risky

Despite the rise of electric cars and stronger action on climate change, it’s still too early to write the obituary of oil. That was the verdict last week of one of the world’s leading energy experts, economist Dr Fatih Birol.

The International Energy Agency, which he leads, is expecting growth in appetite for oil to slow over the next two decades, but doesn’t see demand peaking this side of 2040 because the fuel will still be needed for trucks, ships, aviation and petrochemicals.

As the energy watchdog drily notes, such a scenario would mean a disastrous failure to rein in the worst impacts of global warming.

But there was a glimmer of hope last week from, ironically enough, one of the world’s biggest oil-producing countries. Unlike Britain, which squandered much of the wealth of its North Sea oil and gas boom, Norway has been sensible enough to squirrel away its hydrocarbon tax receipts – and now has a $1tn sovereign wealth fund to show for it.

Now, the Norwegian central bank, which manages the fund, is proposing that it ditch the investments in the very industry the fund was built on.

In a letter to Norway’s finance ministry, Norges Bank wrote: “We conclude that the vulnerability of government wealth to a permanent drop in oil and gas prices will be reduced if the fund is not invested in oil and gas stocks, and advise removing these stocks from the fund’s benchmark index.”

The recommendation rested “exclusively on financial arguments”, it added. Climate change and the environment did not even merit an aside – the advice is all about a fund manager maximising value for their client.

Oil prices have yo-yoed from below $30 a barrel in January to more than $60 now due to output curbs by the world’s biggest producers.

But some experts think that in the medium term it will be lower than in recent decades – Shell’s chief executive has warned of “lower forever” rather than BP’s “lower longer”. Dieter Helm, an influential energy economist, believes oil prices will carry on falling forever. That’s a risk that Norway’s central bank does not want to take.

The institution admits it may even be underestimating the risk from the fund’s £27.73bn oil and gas holdings, because oil firms’ current low operating costs – a response to the 2014-16 price slump – may not last.

“These [costs] may move differently to oil prices, which means that our analysis may underestimate the risk-mitigating effect of our recommendation on total oil risk in government wealth,” the bank noted.

It might be tempting to write off the significance of the move as parochial and relevant only to Norway, which is particularly exposed to oil price falls.

Indeed, some observers have belittled the wider impact of its ditching its oil and gas stocks. “Nothing is imminent and even if the advice is fully implemented we believe this will have limited impact on the oil and gas producers, as the holdings of Norges Bank are relatively small and no doubt will be disposed of over an extended timeframe,” said investment management firm Quilter Cheviot.

They’re right, to a degree. Norway’s holdings of $5bn in Shell and $2bn in BP are not huge given the scale of those companies, and the share prices of both firms have recovered some of their falls since Norges Bank’s proposal was published on Thursday.

But that is to miss the big picture. A $1tn fund has just decided that oil and gas is a sector that’s too risky to invest in. The decisions taken by Norway’s sovereign wealth fund will have ripples, and major investment funds will take their cues from it.

As activist group Share Action points out, institutional investors are already withdrawing capital from oil and gas firms whose business models look increasingly vulnerable. Norway’s fund isn’t the first to realise that, and it certainly won’t be the last.

Airbus A380 is bold and beautiful, but is it too much of a behemoth?

As auspicious places for Airbus to sell a few more of its A380 superjumbos go, this should have been a good one: on the home turf of its biggest buyer, which had signalled its intention to splash out.

Instead, the Dubai airshow appears to have left more clouds over the European superjumbo after Emirates, the only airline to have consistently championed the A380, decided to spend $15bn on 40 Dreamliners from rival Boeing. An anticipated order for 30 Airbus planes apparently foundered on the failure to offer guarantees that they would still be in production in 10 or 15 years’ time.

Airbus chief executive Tom Enders has publicly professed faith in the future of the world’s biggest jet aircraft, but neither its maker nor its main operator appears willing to bet the house on it. Airbus announced in 2015 that the A380’s development costs had finally been recouped, but only eight of the $437m planes will now be built each year. Whether, or by how much, the discounted price airlines pay exceeds production costs is a secret known only to the manufacturer’s accountants.

Airbus’s business hinges on far more than one model: in an order book that now surpasses a trillion dollars, the superjumbo plays an increasingly small part. The firm’s profits took a knock this year, but its share price is rising, and plenty of airlines are convinced by its single-aisle A320neo. Indeed, the triumph of Dubai for Airbus was a single order for 430 of the short-haul planes, its biggest ever deal for departing sales supremo John Leahy.

Yet even a record deal couldn’t deflect questions over the missing superjumbo order. Only in the Gulf has this giant found the sustained financial backing and strategy to keep it flying, while other airlines have cut their cloth to suit different planes and routes.

Emirates’s equivocation will test Airbus executives’ commitment. But it may have confirmed the demise of the A380: like all great dinosaurs, it’s monumental and awe-inspiring, but maybe just too big for this world.

Are wise men behind Greggs’s sausage roll nativity?

Plaudits to Greggs for generating a festive outrage last week that did not revolve around councils banning Christmas. The bakery chain made its pitch for the Daily Express front page by launching an advent calendar with a nativity scene where a sausage roll took the place of the infant Jesus. Cue an enormous social media backlash and the inevitable apology.

But without wishing to spread Scrooge-like cynicism, Greggs’ faux pas seems to have generated an awful lot of free publicity. Indeed, it is declining to pulp its calendar despite stating that it was “really sorry to have caused any offence” and “this was never our intention”. Yes. And core sausage roll ingredients might fly. After this outrage, it is highly unlikely that the tills at one of Britain’s most popular high street food chains will be having a bleak winterval.